Cleaning Services Market Intelligence

Industry Outlook & Drivers

Global Market Outlook on Cleaning Services

• In 2018, the global cleaning services market was valued at $54.5billion. The market is forecasted to grow at a CAGR of 6.3% percent to $88.9 billion by 2025.
• North America, Europe and some parts of the APAC, such as Australia, have high market maturity
• UAE, Saudi Arabia, Qatar, Singapore, Canada and Eastern Europe have medium market maturity.
• APAC and parts of LATAM are expected to be the future growth-driving markets for cleaning services

 Global Cleaning Services Market Maturity

• Cleaning services penetration is still low outside Europe and North America
• APAC and LATAM are witnessing increasing adoption, due to the efforts by large global buyers to consolidate supply bases

Global Cleaning Services Industry Trends 

• The cleaning industry has matured in tandem with other FM services in developed markets such as Europe and the US
• In developing regions janitorial services industry trends related to bundling, outsourcing and value-based approaches are still emerging. But within 2018, they will gain strong footholds

Global Drivers and Constraints 

Drivers

• Macroeconomic Background: High inflation rates in developing countries have a direct impact on the rising demand for wages. Rises in labor costs are crucial for the cleaning services industry, as they drive costs in a direct proportion
• Outsourcing vs. Insourcing: Despite the difficult global economic conditions, outsourcing of cleaning services is the preferred model, compared to performing such services in-house
• The global cleaning industry continues to be profitable, mainly riding upon the growth of the healthcare industry
• Vacancy rates have a direct impact on procuring cleaning services for commercial spaces. Vacancy rates are on the decline, providing the impetus for the cleaning and janitorial services industry
• In a short period, new technologies, more interoperability among different cleaning equipment and more players in the market have resulted in higher growth. This evolution of cleaning equipment's has become an advantage for cleaning service in the retail industry, which helps them to complete the task in a short time with limited resources
• Green cleaning products and procedures will have a higher impact in the future. Hence, businesses should focus on going green and realising the benefits therein

Constraints 

• Labor costs generally represent 80 percent of total operational costs. In addition to the native workers, most of the labor are immigrants and the Regulations associated with such workers can play a major role in managing cleaning services effectively in a particular country
• Britain leaving the European Union (EU) may have negative consequences on the labor supply and thereby poses a threat of increasing labor costs

Supply Market Outlook

High Maturity Regions

• Countries: US, UK, Australia, Germany, France, Spain, and New Zealand
• Suppliers: Established service providers have been providing outsourced cleaning services for more than two contract generations.

Low Maturity Regions

• Countries: Major parts of Asia, Africa, and South America
• Suppliers: Owing to lower demand, the cleaning services market is highly dispersed with local service providers, who are more tactical rather than strategic in nature.

Medium Maturity Regions

• Countries: UAE, Saudi Arabia, Qatar, Singapore, Canada, and Eastern Europe
•  Suppliers: With established global service providers having a strong hold on the market, local service providers are becoming better with respect to their service offerings and quality of services.

Medium-low Maturity Regions

•  Countries: India, South Korea, China, Mexico, Malaysia, and Brazil
• Suppliers: The supplier’s market is largely driven by the presence of multinational FM firms trying to enter into these emerging markets, due to high growth potential.

Supply Trends and Insights 

Global / Regional Supplier

Increase in M&A, Divestments:•

• C&W services, a result of the merger between Cushman & Wakefield and DTZ, is the new brand dedicated to providing facility services
• CBRE acquired the facilities management business of Johnson Controls to add depth to their existing service portfolio and ISS is managing their facilities services through Tempo Services Ltd., Australia
• In Feb 2018, Clean Harbors acquired the Veolia Environmental Services (industrial cleaning), North America and in November 2018, Engie announced that they have acquired SMART Buildings Ltd.
• CBRE group was on an acquisition spree and acquired Noveen Consulting who were focusing on healthcare facility owners, following the acquisition of Ramot Group in Israel
• In Feb 2018, Clean Harbors acquired the Veolia Environmental Services (industrial cleaning), North America and in November 2018, Engie announced that they have acquired SMART Buildings Ltd.
•  In Dec 2018, ISS has announced its plans to shut down operations across thirteen countries, predominantly in emerging regions from Asia and Eastern Europe resulting in cutting down of one lakh jobs by 2020 and divesting the resource to other core services.
• In March 2019, Cushman & Wakefield acquired Brothers Group to enhance its facilities services across Australia and New Zealand.

Supplier Operation Disruptions:

• Increasing cases of supply disruptions owing to suppliers inability to perform and survive in the market due to factors such as extremely high competition, wafer thin margins and high expectations from clients
• Example: Interserve's insolvency, Carillion's collapse, ISS Facility Services disinvesting operations across 13 countries etc

Customized Services:

•  Customization helps in increasing the integrity of services and brings a high level of expertise. Buyers encourage such suppliers, as it reduces the internal training costs for the buyer.
•  Sodexo has upgraded their managerial skills by partnering with Sunshine Coast

TAFE.

Tier-2/ Local Supplier

• M&A: Temco Service Industries Inc., a US-based cleaning services firm, was acquired by Atalian, a leading European facility services firm, as a strategic initiative to enter the US market
• Self-performing Capability : Tier-2 suppliers prevalently self-perform services, which will eventually reduce the troubleshooting escalation matrix for the buyer
• Innovative Service Offering: Suppliers are coming up with new contract models and service options for buyers
• Sustainability Solutions: A programmed facilities management company introduced a new service called sustainable solutions, which takes care of energy, water and emission savings. This shows that the suppliers are interested in providing critical services

Engagement Trends

• Most Adopted Model Globally: Bundled sourcing strategy
• Why : To achieve spending visibility and cost savings
• Contract Length : Three to five years, with an option of contract extension based on performance linked with SLAs
• Pricing Strategy: Shifting from value-based pricing to target, or performance-based contracting and linked with SLAs